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#717: Building The Financial Rails Bitcoin Deserves with Jesse Shrader · TFTC: A Bitcoin Podcast

0:00
You've had a dynamic where money has become freer than free.
0:10
We talk about a Fed just gone nuts.
0:13
All the central banks going nuts.
0:16
So it's all acting like safe haven.
0:18
I believe that in a world where central bankers are tripping over themselves to devalue their currency, Bitcoin wins.
0:25
In the world of fiat currencies, Bitcoin is the victor.
0:28
I mean, that's part of the bull case for Bitcoin.
0:31
If you're not paying attention, you probably should be.
0:36
Jesse Schrader, Bitcoin just passed $69,000, but it's back down below.
0:41
How are you, sir?
0:44
Doing great, Marty.
0:45
Despite the Bitcoin price, we should be higher, but in due time.
0:51
Well, as they say, building happens in the bear markets.
0:54
That's what we're here to talk about today.
0:55
You guys have been building at Amboss.
0:57
Yeah, nonstop building. I think it's five years in the making. It really has all built up to this, to this moment where Bitcoin can become the medium of exchange.
1:08
Before we talk about RailsX and sort of MCP server plugin you guys have built for the agentic economy, let's talk about the history of Amboss.
1:17
Like, why did you start the company? What was the initial idea? How has it evolved over the last five years?
1:23
And on top of that, what has Bitcoin done in parallel that has enabled you to build out Amboss?
1:29
Kind of what got me into Bitcoin was that it was an alternative to the banking system.
1:38
where the customers of the banks, you know, aren't beholden to the banking policies anymore.
1:45
Instead, we have Bitcoin, which is freedom. But then I went to go use Bitcoin to actually pay for
1:52
something. And it was a horrible experience. I ended up paying $60 in transaction fees.
1:59
And I was using overdraft.com, which was like one of the few places where you could spend Bitcoin.
2:04
at the time. This was like late 2017. And my transaction didn't arrive in the 10 to 15 minutes
2:14
that they had allotted simply because a block didn't come in and the transaction got rejected.
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So they ended up refunding my money and had to make me send it again. So pay another $60 transaction
2:28
fee. And I was listening to a ton of Andrea Sanzanopoulos at the time. So he was talking
2:35
about something called the lightning network. So I started experimenting. And in that process,
2:42
I got connected with Anthony Pottevin, who created Thunderhub. He was like one of the first UIs
2:49
that you had on for running a lightning node.
2:53
And we got chatting in a Telegram group
2:57
like as two anonymous plebs that were building the space.
3:02
And he saw that like I was customer support for Thunderhub.
3:07
And so he reached out to, you know,
3:11
explore starting a company
3:12
and building out lightning network tools.
3:15
so that was really the genesis of it and so i imagine this around like 2018 when the lightning
3:24
network was just launched and very rudimentary at that stage yeah this was like the only thing
3:30
that you could spend lightning on was feeding chickens with poyofeed.com oh i remember that
3:35
i remember that i fed that chicken this chicken they well they did um so that was like that was
3:43
the major retailer on lightning, proving the micro payments point from from day one, but it's it's
3:50
evolved so much since then. And really, it was like command line tools, the lightning torch had just
3:57
happened. Folks were running Raspberry Pis, they were blowing up. But things have matured so so much
4:05
more. And now, like, now, like the protocol development, things have like matured through
4:12
like the ordinals explosion and now we've got taproot assets that that are coming to the lightning
4:18
network yeah well before we get into taproot assets when you guys have built rails x i think
4:25
it's important to to since you've been along for this journey of the maturation of the lightning
4:31
network and emboss playing a role in making it easier to use a lightning network i i think that's
4:38
And one thing, and I just was talking to a Bitcoiner earlier today, it's like we do a bad job of setting expectations.
4:47
And I think the Lightning Network is one of the prime examples where it launched and everybody's like, yeah, we have instant settlements with very low fee transactions.
4:57
And the medium exchange use case has been solved after the Lightning Network's launch.
5:02
This was in 2018, and we all came to learn that the Lightning Network is a distributed protocol built on top of another distributed protocol, and Rome is not built in a day.
5:12
So with that in mind, like in terms of the maturation and the development of the protocol, what has happened that has enabled things like taproot assets and now what we're seeing with this sort of flurry of other second layer protocols that are using lightning as this connective tissue?
5:36
Yeah, I think kind of like SegWit for one was the soft fork that kind of made Lightning Network possible by fixing transaction malleability.
5:50
malleability. And then the next one was taproot. And so getting consensus around that piece and
6:00
getting a successful soft fork into Bitcoin was one of those pieces. And the Lighting Labs team
6:09
really did some technical wizardry to be able to figure out how you could contain UTXOs within
6:18
UTXOs and introduce additional assets that are minted on Bitcoin in an extremely chain efficient
6:27
way. So this isn't going to be spamming the blockchain because these assets are meant for
6:34
lightning. They are on-chain assets, but the purpose of them is so that they are lightning
6:41
compatible, which we know is extremely chain efficient because we're seeing it today because
6:48
there's hardly any fees on Bitcoin today, yet there's so much commerce that's still happening
6:54
where we've got, you know, Coinbase, it's making up a dominant portion of its transactions. We got
7:02
integrations with Kraken, Binance, like the whole ecosystem has developed around this. And at this
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point, we've got 28% of all retailers that can accept Lightning. So it really has immersed itself
7:15
in the digital economy and in a scalable way.
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So that change to the protocol enabled us to start bringing new assets
7:27
or new data types into Bitcoin.
7:33
And then talking about liquidity management, channel management,
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I think it's one problem that you guys have worked hard to solve.
7:41
How much have we learned over the last seven, eight years about this interoperable distributed protocol on top of Bitcoin, how it works and how it should be managed if you're trying to use it?
7:56
Yeah.
7:58
After starting to run a Lightning node, I realized that getting connected and connected well on Lightning was a challenge.
8:08
And so we were just doing this via telegram where I would say I'm a well connected node.
8:16
I'll connect to you in exchange for payment.
8:19
So you pay me and I'll open a channel to you and we'll agree upon a duration.
8:25
So I was doing this already just via chat.
8:28
and that was the precursor to us creating a marketplace so that other folks could be able to
8:38
sell channels which was like one of those key pieces because at the time there was one ml.com
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which was like one of the first lightning network explorers and i i have i had a chat going with
8:51
with Tony, who created Thunderhub, and, you know, Amboss co founder and CTO.
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That the one ml experience was terrible, it was all like, it wasn't dark mode. So it was blinding
9:08
to look at, for us all of this basement dweller, lightning node operators. And it was really
9:18
difficult to get the information. And there was no way to easily contact other people and get them
9:25
to open up lighting channels to you. I mean, and that's how you receive payments. So we decided
9:31
that there has to be a market here. So we created magma, which is now the largest liquidity
9:38
marketplace on lightning. We've got 99% market share. At this point, it's growing 20% month over
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month. And it solves a real problem, just getting connected on lightning so that you can receive
9:53
payments very simply. Yeah, that's a massive pain. And again, like talking about growing pains and
10:00
setting expectations, I think in 2018, it's like lightning's launched. We got Segwit transaction
10:07
availability solved where we spin up this network and payments are solved. But along the way, you
10:11
learn, oh, channel management is not trivial. You need a two-sided marketplace to make it
10:16
easier. You need to bring liquidity to the network. And then along the way too, as Lightning scaled
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and matured, learned other lessons. It was like, oh, maybe I don't need this much capital
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locked up in these channels, which leads to a lot of misconceptions in the broader public.
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They'll look at whatever it is, 4,700, 5,000 Bitcoin locked in Lightning, and then looked at
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something like wrap Bitcoin on Ethereum, it has tens of thousands of coins locked up and say,
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well, lightning is not having the success that it is. This is, but it's like, well,
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the way these payment channels work, you can actually do a lot more with a lot less. And so
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capital efficiency is something that the lightning network has gotten extremely good at over the last
11:01
three years specifically. Yeah, it's a great point because lightning is extremely capital efficient.
11:09
You're connecting it to a network.
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So you've got a single connection and that's kind of becomes a nexus.
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So you can reach anywhere in Lightning in just a few amount of hops.
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So you could reach the 15,000 or so nodes out there in four hops or less quite easily.
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You really don't need a whole bunch of extra capital.
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And that means that to handle the level of commerce that we're seeing on Lightning today, which we're we're estimating it over 10 billion dollars annually is flowing through Lightning.
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That means that the entire balance of that's locked in Lightning is cycling twice monthly.
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because we've got, you know, $500 million of capital in Lightning,
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which means it's super, super chain efficient, super capital efficient.
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We really just have liquidity sloshing back and forth.
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That's generating fees for the Lightning node operators
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and the ones that are well positioned, especially.
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Yeah.
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$10 billion a year.
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We need to pump that number.
12:18
Do you think that number is going to go up moving forward?
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I gotta say, these are the numbers. I mean, it's already growing, but these are the numbers before agentic payments really take off and before stable coins get involved, which are both massive drivers. So I'm incredibly bullish on where we're headed with this, even before those things were growing.
12:44
yeah well let's hop into it taproot assets uh for anybody who's listening out there that's
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completely unaware of what that um that phrase means at all let's let's do a a high level explain
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it like i'm five what are they why do they exist what are they competing with and how
13:04
are they implemented um within bitcoin and the lighting network yeah so in order to create a
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taproot asset you're going to construct a specific bitcoin transaction that says
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what asset you're creating how many of these tokens exist and what group are they part of
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so that means you could do an initial burn or a initial mint of this asset bring it to bitcoin
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and then you can do subsequent mints or subsequent burns on that to control how much of this asset is
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created. And the real purpose of this is that you can create a token and then have it backed by
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something outside of Bitcoin or another blockchain or whatever. The thing is, it's a token. And of
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course, you're going to be introducing trust assumptions in whatever is backing it. I think
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Genius Act and whatnot have done a lot of things to support how this should be done. But at the
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technical level, it's creating a new token, how many of them exist on Bitcoin, and making it
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provable that there's only so many of these assets in existence. And so I think that's
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I think people hear that and are like, okay,
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is Pump.Fun coming to Bitcoin?
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Is the shitcoin casino coming to the Lightning Network?
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Are we enabling this proliferation of what many Bitcoiners,
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myself included, would deem to be sort of casino-like games?
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Or in your view, I mean, you mentioned stablecoins,
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and Tether has publicly stated that they're leaning into this.
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Like, is it going to be something like stable coins?
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Obviously, real world assets is a big meme tokenizing real world assets this cycle.
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How do you envision this this playing out in for stable coins specifically?
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What is the benefit of minting and issuing and transacting with these stable coins over lightning compared to something like Tron or Solana or whatever they're running on today?
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Sure.
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So Solana might be easier to issue some of these assets, especially any of these crypto casino tokens.
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For Bitcoin specifically, what makes sense is for us to focus on what's meaningful for finance and settlement.
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So I think that's where stablecoins fit the best.
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Because minting and burning is cheap today on Bitcoin.
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But we know that the global financial system is coming to Bitcoin and we have to be extremely chain efficient.
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So if you want to introduce these other types of casino tokens, I wouldn't bother doing that on Bitcoin itself.
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I would really focus on stable coins because what you paying for is a blockchain that can be stopped that has extremely high uptime
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Like there's a reason that we we build on Bitcoin itself, because
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it does have that full decentralization. And we've got the
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most decentralized layer two built on top of it, which is
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lightning. So I'd focus things as much as possible on stable
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coins. We may see other things like real world assets, tokenized gold, etc. But I think where
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we see the most momentum and where we need lightning scalability is on stable coins,
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especially US dollar stable coins. Yeah. And so my vaunted co-host of Rabbit Hole Recap,
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Matt Odell, he's been a longtime banger of tap ass and stable coins on lightning specifically.
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and his argument, and I can see it,
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I think it's a valid argument,
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but I think you're the perfect person
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to play devil's advocate here
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is table coins benefit from the centralization
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of networks like Tron and Solana,
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the relative centralization,
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and trying to introduce them
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to a truly decentralized layer two and Lightning.
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You sort of get the worst of both worlds
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where you have to play in this world that's distributed,
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you have all this channel management,
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you have wallet compatibility considerations
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to think about what is the steel man case
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for issuing and transacting with stable coins
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on Lightning specifically?
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If you're going to create a new token,
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it will be centralized.
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You're going to have one set of assets and liabilities.
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You want to be looking at one balance sheet.
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You don't want to look at a ton of them.
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I think things that I find interesting might be like Caitlin Long's tokenized deposits,
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where those could become taproot assets.
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And so you could have something that is on the Lightning Network being traded that's backed by one bank that has solid assets and liabilities that match up.
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So I think there is a centralized component to this.
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And you do want to have one person that you can summon into a courtroom to answer for the assets and liabilities not matching up.
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I don't think you want to be in a fully decentralized system trying to seek out individual parties that are behind a single asset.
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For Bitcoin, it's a different story because this is an asset without an issuer.
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It is fundamentally different, which is why that Bitcoin is superior to any of these other tokens.
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And, you know, I was just in El Salvador.
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I heard Paolo from Tether talk about this.
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The guy is a Bitcoiner and also witnessed, hey, you know, we created this token.
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It's a US dollar stable coin.
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It's kind of a dumb thing.
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However, it has extreme product market fit because the world's demand for dollars is immense.
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But it doesn't need to be an issue where like it, it could be, it could be a government.
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I think, you know, all of us are terrified of CBDCs.
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However, I'm less terrified of them if they're on Bitcoin itself, because you don't have that censorship ability on Bitcoin itself.
20:05
It's a different story.
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Yeah, I saw Paolo speak at the Bitcoin Policy Institute event in June.
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And it was funny how he described the recreation of Tether.
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It was like somebody asked us to build it.
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And we said, OK, we'll build it, like sort of hand waved it.
20:25
No way. Maybe this will get a $100 million market cap, but we have the capacity and the ability to do it, so we'll go do this.
20:33
Obviously, it's turned into, I don't know what its latest market cap is, somewhere north of $180 billion, I think.
20:39
They're probably the most capital-efficient company that's ever existed in terms of profit per employee.
20:47
and obviously they're one of the, like it or not,
20:54
one of the most important companies in the world right now.
20:59
And to your point, like product market fit really proved itself out.
21:04
Yeah, I think proof is in the pudding.
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Overall, people want dollars,
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and Tether found a way to support the U.S. government
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And I mean, in many ways, at finding a buyer for all of the government's debt through purchasing treasuries, tokenizing them and delivering them to the rest of the world.
21:25
And I think the Trump administration has really figured this out to recognize this does help U.S. interests and has been a big part of why the U.S. is now embracing stable coins, because it does solve a problem.
21:42
it fines the buyers for the debt that otherwise would not be attractive because the dollar has
21:48
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23:06
So let's talk about RailsX. Why does Dex is so hot right now?
23:10
Been hot for what, like five, six years now after Uniswap launched.
23:16
Many people are looking at Hyperliquid right now as a competitor to exchanges like Coinbase.
23:23
And if you look at the profitability per employee at Hyperliquid compared to Coinbase, they're doing far better.
23:29
It seems like there's product market fit outside of Bitcoin or decentralized exchange.
23:36
Why does something like RailsX, a DEX on Lightning make sense?
23:42
I think this is going to be the first DEX without its own token.
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The token is Bitcoin.
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And we have other assets that can now be traded on Bitcoin via the Lightning Network.
23:55
So just about Lightning's efficiency, now we're going from blockchain level efficiency, which we know does not scale.
24:04
You look at Tron, they're seeing $3 to $6 per transaction.
24:08
And we're moving to the level of a data network, which is Lightning.
24:14
So it performs much similar to that.
24:17
So that means that we can have a decentralized system with no new token created that is operating like the Internet in terms of scale so that we can achieve extremely low spreads.
24:31
And you can have a full decentralized economy that is all self-custody.
24:37
Each of the players that will use RailsX can bring their own infrastructure.
24:42
We can help them set up their own infrastructure.
24:44
They can buy and sell digital assets peer to peer and choose their counterparties, choose their own policies.
24:52
Like this is the decentralization that I wanted to see when I was, you know, in a call center listening to folks be beholden to a bank's adversarial policies when this is about self-determination for Bitcoin.
25:11
This is about sovereignty.
25:13
This is about freedom.
25:14
to transact with who you want, associate with who you want
25:18
and be able to trade seamlessly.
25:20
Yeah. How did you guys land on the idea for Rails X?
25:23
And beyond that, like,
25:27
let's talk about the implementation.
25:28
How does it actually work? What's happening on the lead?
25:31
Yeah, it solves a problem for us internally.
25:36
The thing is, we back in May,
25:39
we announced Rails, which is a yield service.
25:43
So we got RailsX that's doing trading peer-to-peer.
25:47
And for Rails, it's a Bitcoin yield service where you keep self-custody.
25:53
And the point of introducing Rails was that we needed incentive alignment between the Bitcoin treasury companies and Bitcoin's adoption as a medium of exchange.
26:04
We wanted all that yield-seeking behavior to be saying, I want Bitcoin payments, and I want Bitcoin to be the medium of exchange.
26:13
Because that's honest yield.
26:16
That's no lending.
26:17
That's no rate hypothecation.
26:20
But for routing, you've got Bitcoin that's sloshing between your channels.
26:27
And you're collecting fees when that happens.
26:30
However, when you introduce a new asset into this, the sloshing that's happening, that means that your portfolio is shifting around.
26:41
So if I'm routing a whole bunch of stable coins to some business that wants to receive stable coins, that means that me as the next peer over, I'm accumulating Bitcoin and I'm losing my stable coin balance.
26:56
So if I allow these customers who are using Rails to keep self-custody, then I can't rebalance their channels for them.
27:08
So because we introduced that limitation and we thought self-custody is important, then we needed some other force in there to rebalance the channels for them between the assets and keep their portfolios relatively constant where they can have sloshing back and forth.
27:29
So what we did for Rails is we started generating price quotes, which is what Lighting Labs would call the edge node service.
27:41
So Rails as a yield service in multi-assets, they're quoting prices between assets.
27:49
And now those prices get piped into Rails X.
27:54
And so for Rails X, you see all these different prices being quoted.
27:59
So a RailsX user can do simple buy low, sell high between different nodes on the network,
28:06
and they are rebalancing the channels and capturing arbitrage opportunities for accumulations and shortages of assets within the Lightning Network.
28:18
Okay, I need to get my agentic bot in this network.
28:25
Everybody's focused on Polymarket.
28:27
RailsX is here.
28:28
There's probably better arbitrage opportunities there in the early days.
28:31
You know, I think the the bot play is like one of the first things that came up, like as soon as we built this, because it's all just going to be circular rebalances in Lightning, but across assets.
28:44
And it is something that is completely programmable, but it solves a problem for the people that are seeking yield and the people that are receiving payments across assets and want low spreads.
28:59
So it is an open market approach to solving multi assets in lightning.
29:06
what do you think this does
29:09
for capacity on the lightning network
29:14
obviously we're talking about lightning's capital efficiency earlier
29:18
but let's just run down the thought experiment
29:22
people wake up and say oh
29:24
why would I want to have my stable coins run on Tron or Solano
29:28
when they can run on the lightning network
29:30
and be compatible with bitcoin invoices
29:32
maybe at the end of the day too
29:34
and you see a ton of activity flood to the lightning network obviously it's very capital
29:42
efficient but that capital efficiency will hit a limit which would dictate that more capital needs
29:48
to be locked up in channels and so in terms of the growth of channel capacity and bitcoin
29:54
locked on the network what's that going to do um what effect is something like rails x and
30:01
taproot asset that's taking off going to have on that? And yeah, just broadly, where do we go?
30:06
Where do you see this going from here? I think the capacity, the Bitcoin public capacity
30:13
may not increase all that much. Interesting. So there's a couple of reasons for that is because
30:24
all of the taproot asset channels are private. So if you want to continue to use the lighting
30:29
network, you say, I don't want to deal with any other assets or any other tokens, you can continue
30:34
to operate purely in Bitcoin. This does not affect you. The only thing that changes is
30:40
like the volume of transactions that are flowing through. So we're going to see much more cycling
30:47
that's happening. And I think just this week, Voltage announced the million dollar payment
30:56
on lightning. So huge achievement for them. I think a massive proof point to say,
31:03
you know, lightning is no longer for for micro payments. The max size channel that you can do
31:08
on lightning is 21 million Bitcoin. So there's really no protocol limitation on how large you
31:15
can go. So that means that as this takes off, we're going to see much larger channels that
31:26
are created to be able to settle larger payments that are happening across assets.
31:33
Because long term, this becomes the foreign exchange market.
31:38
If everybody's issuing their own stable coins, which ones are going to take off, there's
31:42
going to be much more of like macro level countrywide speculation on the performance
31:49
of these tokens, which are sovereign currencies.
31:56
And overall, it's going to mean much more commerce because foreign exchange market is massive.
32:02
They do nine point seven trillion dollars every single day settled in that market.
32:08
It's the whole market.
32:10
And that means that Bitcoin is going to take that sector.
32:16
And Bitcoin, whenever its price goes up, that means fewer of the tokens move around on lightning because it's like the pipes just explode.
32:26
for how much value can be settled.
32:28
So overall, it's positioned to be long-term bullish,
32:32
and that could mean that it can remain extremely capital efficient,
32:37
but we will see shortages and when there are shortages of Bitcoin in Lightning that means the yields spike up So overall much more routing activity Yeah that another thing we forgot to mention
32:51
with the capital efficiency number go up.
32:54
Just makes it so you have to send less SATs per payment.
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33:09
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33:12
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33:13
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33:14
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33:18
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33:20
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33:21
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33:22
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33:26
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33:28
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34:57
I love the confidence with which you're saying all this.
35:00
Bitcoin is going to take the FX market.
35:02
This is happening.
35:03
this seems very underappreciated right now.
35:07
I would argue most people are completely unaware that this is even possible on Bitcoin right now.
35:13
You're boots on the ground.
35:14
Obviously, you're on the cutting edge of all this.
35:17
I saw you in person in New York earlier this week making the rounds.
35:22
What would you say to the relative awareness of something like Tappard assets
35:27
or not even Tappard assets specifically, but the fact that this is possible on Bitcoin?
35:33
are people beginning to wake up to it when you give the pitch are you seeing people recognize
35:40
the the benefits doing it this way as opposed to on another change or a combination of chains
35:45
how and to that point like how long do you think it takes for the market to wake up to this
35:53
as far as as far as the adoption goes um lightning is going to solve one specific use case in pockets
36:00
So Bitcoin Beach in El Salvador, it's like a great example of, you know, adoption happening in one place.
36:08
And for Amboss, we're a middleware provider.
36:13
So we're operating at the liquidity market side.
36:16
But then we have folks like Voltage that are solving payments API adoption.
36:23
So they're mapping to the user cases.
36:25
so all the lightning network activity is going to happen in the background so all we're going to see
36:34
is widespread adoption of the lightning network invoice so this is going to do the settlement
36:40
across the network it it won't matter what currency that you're transacting in so we just
36:48
have something that's standard that's bitcoin compatible whatever currency you want to send
36:52
whatever currency you want to receive, it's all using the exact same invoice.
36:57
And what we're seeing from Voltage is they're answering the needs of iGaming first,
37:04
which they are having an immense amount of trouble getting a simple bank account.
37:11
And Stripe and the other payment processors don't want to serve them because those customers
37:17
are they have incredibly high fraud rates. They're getting killed by chargebacks.
37:25
So Bitcoin is there for them to serve like that market. And they're doing incredible volumes,
37:32
all of the poly market stuff, all of the like online gambling type of things that is going to
37:40
get served by Bitcoin, by lightning payments, because it can do the micropayments. It doesn't
37:47
have chargebacks and it's more decentralized. It can operate in many of the underserved markets.
37:57
And so when you said everything's going to be abstracted away to a Lightning invoice,
38:03
you can pay in whatever currency you deem necessary or prefer, does that necessitate
38:10
local stable coins or like are we talking something like you're just going to pipe into
38:16
like the like what strikes doing with like you can send or cash app like dollars to bitcoin
38:22
is like integrations like that that interface with the banking system itself a combination of the two
38:28
yeah like we'll still have on and off ramps and those on and off ramps that's what you'll where
38:34
you'll have KYC, AML type of stuff. So if you want to move to the traditional financial system,
38:42
but if we're operating purely on Bitcoin, then you don't need to touch the traditional financial
38:48
financial system. You can continue to operate. So like that's where there's going to be some
38:55
friction is when you want to go to a traditional bank account. However, if you've got tokens that
39:00
are issued on Bitcoin. Now, you can trade peer to peer. You can start accepting currencies
39:07
without needing a bank account anymore. And you've got something that is widely interoperable. So
39:15
anywhere that accepts a lightning payment, then you could off ramp to a bank account.
39:23
Yeah. I mean, it seems extremely profound. And again, it's like I'm banging my head.
39:29
Why doesn't the market realize this yet?
39:31
And obviously your answer is going to start in pockets,
39:33
but it seems like we have accessibility to sci-fi tech.
39:42
It's going to be flat, flat, flat, flat,
39:45
and then it's going to be vertical.
39:47
I mean, this is a gradually,
39:48
then suddenly type of adoption for Bitcoin payments.
39:52
Yeah.
39:53
Who do you think, I mean, outside of Bitcoin Beach,
39:55
like what, or maybe a better way to frame it is,
39:57
what would your ideal...
39:59
adopter look like? For us, massive volumes. If you want to be moving a ton of value and not have
40:08
anyone looking over your shoulder to kind of say to slow you down in any type of way, then like
40:18
lightning is what you should be using because it's incredibly scalable. You can also do
40:24
micropayments. I think this is what makes sense for the machine economy. You want to have AI agents
40:30
and your clod bot just running wild and making money for you or paying out money, hiring your
40:40
fellow humans. That can happen on Lightning at scale because Lightning can do 40 million
40:47
transactions per second. Well, any of these other chains like Solana, you know, it's going to cap
40:53
out at 70,000 trades actions per second. Yeah. Well, you brought it up. The agentic economy,
41:01
how big is this opportunity and how real is it? And most importantly, I'll just give this
41:08
little preamble. I think a lot of Bitcoiners are just assuming, oh, the agents are going to
41:11
choose Bitcoin because it's the best money. It's obvious. But if you've been playing with these
41:16
tools, you realize that we're not at AGI or ASI yet, and they are very subservient to their
41:23
masters and will do whatever you tell them. And so I think the onus is on Bitcoiners not to convince
41:30
agents that Bitcoin is the best money, but the people actually controlling the agents that this
41:34
is the best way to do it. But the opportunity is massive. Yeah, I think DeFi has already told us
41:43
that Bitcoin is the favorite.
41:45
That's like the same.
41:47
It's the safe zone
41:49
or you denominate your wins in defy
41:53
in Bitcoin terms.
41:55
Of course, you know, stable coins are probably
41:58
second to that.
42:00
Or, you know, maybe I'm maybe I'm wrong on that.
42:03
Maybe people love stable coins as the first stop,
42:07
but it's going to seek deep liquid markets.
42:10
yeah
42:13
and so
42:17
thinking about equipping these agents
42:19
I mean you guys
42:20
released something for that too
42:23
I think that's been fun to watch the last two weeks
42:25
specifically as everybody has realized
42:27
like oh maybe I should play around with OpenClaw
42:29
and now they're realizing
42:31
they're mapping
42:33
the territory and realizing that these agents
42:35
can spin up
42:36
mine has a Phoenix D server
42:39
and is able to LNURL auth into websites
42:43
and then send Bitcoin and transact pretty autonomously.
42:47
And it's been fun seeing you guys.
42:50
I think I saw Magnolia, I think for their bank accounts.
42:56
I didn't know that they have Bitcoin compatibility,
42:58
but we've seen MoneyDevKit out.
43:03
I think Bram Cranstein came out with something
43:05
And that makes it easy to get your agent access to a Bitcoin wallet via Nostra Wallet Connect.
43:12
And so we've had this explosion of skills in the Bitcoin space trying to equip agents, which has been fun to watch.
43:20
Heck yeah.
43:21
Yeah, we released the Magma MCP so that your AI agent can understand how to source liquidity so that you can access an open marketplace for liquidity.
43:35
You're not going to be locked into one provider that might be behind some of these other LSP tools.
43:45
So, yeah, you can access liquidity from anywhere on what makes sense.
43:50
So the Magma MCP is like a step in that direction so that you can choose the right infrastructure, you know, whether it be Albi Hub or Voltage or an LDK node and source liquidity in a decentralized way.
44:05
I need to teach my agent Martin bot how to I need to give it the magma MCP plugin.
44:16
It's right. I opened the channel via a bolts submarine swap to async. It was rather expensive
44:23
and it is going to have to it's very profitable right now. It's making some Bitcoin. It's going
44:30
to have to rebalance channels and it would make sense to to plug into a liquidity pool that does
44:35
efficiently right it does um it's it's straightforward for humans to do um but also
44:44
now your agent can do it uh it's really just paying a lightning invoice yeah well that's the
44:49
point i think matt and i've been talking about and others like the craziest thing of the explosion of
44:55
this sort of harness on top of these llms has been i mean i would push back and say like yes
45:01
It's easy for a human to use magma, but the humans that are using magma are people that are like on not on the cutting edge, but like understand Bitcoin, understand the lightning network, understand channel management, liquidity, inbound, outbound liquidity and all that.
45:17
But I think the layman is never going to take their put in the effort to understand the intricacies of how this works and how to be capital efficient.
45:26
And the beauty of this emerging agentic economy is that your computer can just learn how to do it and do it for you without you having to do the hard work.
45:37
Exactly.
45:37
And I think that's going to be massive for adoption and usage on the Lightning Network specifically.
45:43
It's going to be huge.
45:45
I mean, now we've got MCPs, which are like just forcing your AI to read the docs, read the manual and know how to use these tools and then be able to map those to the solution, which is, you know, earn money for your for your human.
46:04
Yeah, well, let's get into that.
46:06
Like, so when you're building this MCP, what is what are the docs where the the manuals that you're handing agents?
46:13
yeah it really is uh just kind of teaching an agent how to use an api so overall you know
46:23
what lightning invoice do you pay um and kind of what happens then who would like what types of
46:30
authentication do you need in order to do this um it really is uh the two two or three api calls
46:39
in order to order liquidity, but it would map into a larger set. So, you know, does your AI agent
46:48
know how to run a Lightning node already? When does it need to purchase liquidity? That's where
46:55
it would use the MCP portion. So it really is a small element of the overall stack, but it's an
47:01
important one because that's the piece that gets you liquidity, which enables us to have a debt-free
47:08
payment system that works for anyone, whether they be human or an AI.
47:15
Have you been playing around with the AI tools a lot?
47:18
I haven't myself. However, my team has. And overall, I'm seeing the productivity come out of
47:28
it. That is massive. Any of these small elements that I see, like, on our, like, UI, that, you know,
47:38
I would want to tweak or fix suddenly that it's on the table.
47:42
That's a fun four minute project for them to do instead of spending a day on it.
47:47
Um, this is a productivity accelerator.
47:51
Um, we're in a completely different paradigm now.
47:56
Well, as a founder, how does it, how's it changed how you view scaling your business?
48:02
I just heard that Twitter is now a team of 30.
48:08
30 people are running X.
48:11
That tells me that there's incredibly lean teams that are able to take on the world.
48:21
If you have good judgment, you now have rocket fuel added to your ability to execute that.
48:31
if you execute if you have poor judgment now you become a slop cannon and are just I saw
48:38
launching the garbage everywhere yeah you don't want to be a slop cannon don't be a slop cannon
48:45
you want to be really thoughtful about how you're using these tools because they're
48:51
incredibly powerful and you could be so much faster yeah yeah what was the the four quarters
48:57
is like high agency, competent, top right,
49:01
like you're going to be fine,
49:02
but it like low agency incompetent you just going to be a slop cannon where previously before AI tools like if very low agency low competency you can hand them menial jobs but in the world of AI slop
49:14
potential, they could really screw things up. It's true. Um, so, you know, we built,
49:21
we built a great team. So overall, I'm, I'm loving how they're using these tools,
49:26
because we're able to achieve way more, um, and deliver, deliver awesome products faster.
49:33
Yeah. What, I mean, beyond what we've discussed today, Rails, RailsX, the MCP plugin, what are you looking forward to in the immediate and medium and long term future in terms of like product suites and just Bitcoin overall?
49:53
What do you think needs to happen?
49:55
I think, again, opining back to my comment earlier,
50:00
or hearkening back to my comment earlier about the fact that I think,
50:05
particularly in the last two years, Bitcoiners have gotten complacent in the sense,
50:07
it's like, oh, it's built, it'll just happen.
50:09
It's like, no, I think we need to get out there and really prove that it's worthwhile
50:13
and you should be adopting this.
50:15
what do you think needs to happen for for bitcoin to basically hit that tipping point where the
50:24
mainstream doesn't look at it as some volatile ponzi scheme asset but something that has
50:29
incredible inherent value that can really improve their lives and their businesses
50:35
i i think um what i'll look forward to is you know bitcoin continuing to do what it does
50:44
and be robust, reliable infrastructure.
50:50
I think really that's, it's underpinning our value system.
50:55
And it's going to be our rock going into the next years,
50:59
which are going to be increasingly chaotic.
51:02
While the rest of the world does what it does,
51:05
Bitcoin will remain our steady hands.
51:09
And I think that's like that most important foundation.
51:14
And being that it's open source, and now that we're equipped with AI tools, the acceleration of development in order to be prepared for what's ahead, we just become more capable so that we can continue to be productive and continue to do good things based on solid fundamentals where I'm more bullish than ever on our future.
51:43
And I think that'll pan out. I think people will start to realize the Bitcoin builders are the ones that last and they're not being distracted by a whole bunch of token incentives. They'll continue to build. I think that will long term really pan out for the venture capitalists within the space that are investing in Bitcoin companies. And we'll watch it play out.
52:09
Thank you for that plug for venture capitalists there. It's much appreciated.
52:13
Yeah. To your point, I think just like the long and steady brick by brick progression, just like staying the course is most important.
52:32
I really like what you said about Bitcoin just being this reliable anchor as we go through this crazy, chaotic transition in the world where there's technology with AI and disruption that comes along with it, the geopolitics, the throw in the Epstein files, whatever's happening.
52:48
And to your point, like I've always liked to explain Bitcoin and it's been described as a truth anchor and all this, but like visualize it to people.
52:56
For some reason, I always had this weird visualization of Bitcoin that really harkens back to the first iteration of double entry accounting, which is where you would live in a town square.
53:08
And then you'd go to the bank and you'd say, hey, I did a deal with him.
53:11
I need you to change the debits and credits in our accounts to account for that.
53:15
And Bitcoin is simply, instead of going to that bank in the middle of that town square, it's just like a beam of light streaming into the air.
53:23
And that is like what you anchor into.
53:25
And anybody can approach you.
53:26
You don't have to talk to an individual.
53:28
You just go up to that beam and you anchor the truth of your transaction into it.
53:34
It's very esoteric, probably a little gay.
53:37
But I think that visualization, it works for me at least.
53:43
But to your point, having this stability, I don't think people really recognize the profound nature of this in these chaotic times.
53:52
But being able to depend on Bitcoin to do what it does, produce a block roughly every 10 minutes, have a difficulty adjustment every 2016 blocks, have a subsidy halving every 210,000 blocks.
54:05
That is incredibly value in a world in which things are changing rapidly around us.
54:13
Kind of speaking to, you know, being a founder, one of the biggest risks that we can have is to get distracted and not be laser focused.
54:24
So I deeply appreciate the Bitcoin or meme of laser focus.
54:29
And I think Bitcoin in many ways embodies that.
54:32
Like you said, in order to create that beam of light and Bitcoin become, in Dan Tapiero's words, be a truth machine, like what Bitcoin is doing is saying no to thousands upon thousands of garbage transactions that are out there to say, you know, no, this is not going to be part of the record.
54:55
And only when you meet all of the stringent requirements of being provable, in fact, we know exactly where the money came from to make this transaction happen.
55:08
Only then does it get approved to be part of the Bitcoin blockchain.
55:12
And I think that is powerful.
55:15
It's objective.
55:17
And it gives Bitcoin what it needs to be to be that solid foundation.
55:22
It's very simple, too.
55:24
I think it's important to, I think it's another thing we've gotten away from, at least in the Bitcoin public sphere on X especially.
55:33
These simple truths that exist within Bitcoin that are simple yet extremely powerful.
55:39
If you're not abiding by the rules, if you don't have a UTXO, a valid UTXO with an amount of Bitcoin that can cover the transaction you're trying to make to a public address that actually exists and is compatible with the network as well, it's not going to happen.
55:54
That's simple. It's relatively dumb from an engineering perspective, but it's extremely powerful.
56:02
Yeah, I love it. Another aspect that, you know, like looking forward is really about privacy.
56:11
I think we're seeing a lot of hand wringing of the stable coins, you know, talking about how they're going to incorporate privacy.
56:19
but I think a lot of the stuff around Lightning and its ability to keep transaction level privacy
56:28
is being undervalued when it may be that solution that the stablecoins need in order to protect
56:36
transaction level privacy but still have things be fully accountable at the blockchain level.
56:43
Let's jump into that. How would stablecoins running via Tappert assets over Lightning
56:49
provide an individual actor with more privacy
56:53
compared to doing it on Tron or Solana or whatever it may be?
56:59
Yeah.
57:00
Well, at the blockchain level, you can see every single transaction.
57:05
And so if you've got something that's on Tron,
57:09
well, you can look up the record of that.
57:13
Many of these blockchains operate the same way
57:17
unless they have some type of cryptography like Monero.
57:23
But then for Monero, you lose the ability to do the widespread accounting calculation
57:28
and making sure that there is a known supply that has not grown.
57:36
So that's one of the pieces that Bitcoin has.
57:38
We know there's never going to be more than 21 million.
57:42
We can run the script.
57:43
it doesn't take long at all to count how many bitcoins have been created
57:47
but when it comes to scaling things up you create a lightning channel and there's a certain amount
57:56
of bitcoin in to create this what i like to call it joint account with it with another peer
58:03
any of the individual transactions within that lightning channel they don't exist on the
58:09
blockchain, nor will they ever. And then, you know, after some years, you may close out the channel,
58:17
and each, each party in the channel gets their payout, which is the net settlement after many
58:26
years and thousands or hundreds of thousands or millions of transactions have occurred. So it
58:33
gives you that transaction level privacy. But what is lasting is your peers, all the friends
58:40
you made along the way to connect to other folks. You're kind of building a reputation at the node
58:48
level instead of at the individual transaction level where people are peering into everything
58:54
you're spending money on. Yeah, it is still mind boggling to me, just like seeing people
59:00
trading on Polymarket or trading assets on chains like Ethereum, like due to their account-based
59:07
system, you can just see, you can just be like, oh, here's Vitalik's wallet. Like it's his,
59:14
we know it's his and we can see every transaction he's making. And there doesn't seem to be any
59:19
qualms or worry about that sort of lack of privacy existing on all these chains,
59:28
especially when you're especially for like poly market indexes and things like that.
59:32
If you're trying to get a market edge, but everybody can see your balance at any given point in time and what assets you're trading.
59:38
It's like it seems like we'll look.
59:41
I mean, at least who knows?
59:42
Time will tell and the market will decide.
59:44
But to me, it's like I think we'll look back at this.
59:46
But it was insane that we did things this way.
59:50
It's going to be crazy because, you know, for lightning, we're creating side ledgers.
59:55
That's what each channel is.
59:56
It's a side ledger.
59:57
you just have with one other party.
59:59
And I know Lighting Labs has been working on a tool
1:00:02
to actually erase that history once it's over.
1:00:06
There's no need to keep it around.
1:00:10
Yeah, it's nobody's business
1:00:12
and it doesn't need to exist anymore.
1:00:14
But we don't have to live in a world
1:00:16
where there's going to be massive data breaches
1:00:19
where all of this information gets exposed
1:00:22
and people are pouring through it later.
1:00:24
yeah yeah we're gonna do it the right way this is exciting i know you've been working on this uh
1:00:34
very hard for the last five years it's uh it seems like the momentum at emboss has been picking up
1:00:38
considerably over the last year uh and so it's really fun to see you guys succeeding launching
1:00:45
new products and really honestly pushing the industry towards a place where i would argue it
1:00:50
needs to be again i'm not i don't i'm not a trader i don't i'm not going to speculate on
1:00:55
assets that are trading on dexes i recognize the value of stable coins the product market
1:01:00
fit they've had and for quite a while over a decade now um the whole meme is going to be like
1:01:07
what you can do on uh shitcoin trade chains is eventually going to come to bitcoin but i think
1:01:13
the hard discussion within bitcoin uh across that decade has been all right we need to make sure
1:01:19
we do it the right way with a trade-off set that everybody's comfortable with.
1:01:25
And I think pushing all this up into lightning makes a lot of sense from the scalability efficiency
1:01:32
perspective, but then to a large part of what we just discussed, the privacy aspect of it
1:01:38
as well.
1:01:40
That's doing it the right way.
1:01:43
Yeah.
1:01:43
Thank you.
1:01:44
We have been working hard at this.
1:01:48
And overall, it's just because we want people to have more control over their financial futures, not be beholden to others and what policies they institute in some backroom deal that you could have sovereignty over how you trade, how you interact, how you peer with others, how you associate.
1:02:10
and this gives us quite a bit of power at the individual level to be able to select
1:02:19
what currency we want to receive what currency we want to send and that information isn't even
1:02:26
contained in the lightning invoice it's going to be private on what currency you are receiving
1:02:31
and what currency you're sending and bitcoin is at the core of it going to be that connector
1:02:38
So Bitcoin can become the medium of exchange and not just a store of value.
1:02:44
Is that privacy attained via Bell 12 specifically on the invoice?
1:02:49
It's not.
1:02:50
The way it works is you're going to choose which channel you're going to receive your payment in.
1:02:57
And one of those channels may be a taproot asset.
1:03:00
So it really just looks like a routing hint to say, hey, use this channel that is not publicly visible.
1:03:06
Okay.
1:03:08
Okay. So just just around it.
1:03:11
I'm going to go out that they don't know what the routing.
1:03:13
Exactly.
1:03:15
Yeah. It's beautiful.
1:03:17
Well, Jesse, I hope the next time we're in New York together,
1:03:20
we get to make a trip back to automatic slims and sing sing American Pie.
1:03:27
We didn't.
1:03:31
I'm looking forward to it and we can catch a 4 a.m. slice of pizza.
1:03:35
Yeah. Look, look forward to it.
1:03:37
where can anybody so curious find out more about what you guys are building on
1:03:42
Amboss test out Rails Rails X
1:03:45
Magma MCP
1:03:47
you can always find our information at
1:03:52
Amboss.tech for the company site if you want to dive
1:03:56
deep into exploring lightning it's Amboss.space
1:03:59
for the explorer but you can find us on X
1:04:03
at Amboss Tech or follow us on Noster as well
1:04:07
yeah I'm available as
1:04:10
jesterfer underscore btc on x
1:04:12
great
1:04:14
x handle jesterfer
1:04:16
we'll include all those
1:04:18
links in the show notes I hope you enjoy
1:04:20
the rest of your Friday and
1:04:21
can't wait to see you again brother
1:04:23
yeah look forward to it thanks so much
1:04:26
Marty
1:04:26
peace and love freaks
1:04:28
thank you for listening to this episode of TFTC
1:04:32
if you've made it this far
1:04:34
I imagine you got some value out of the episode
1:04:36
if so please share it far and wide with your friends and family we're looking to get the word
1:04:41
out there also wherever you're listening whether that's youtube apple spotify make sure you like
1:04:48
and subscribe to the show and if you can leave a rating on the podcasting platforms that goes a long
1:04:54
way last but not least if you want to get these episodes a day early and ad free make sure you
1:05:00
Download the Fountain podcasting app and go to fountain.fm to find that.
1:05:06
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1:05:11
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1:05:14
So please consider subscribing via Fountain as well.
1:05:18
Thank you for your time.
1:05:19
And until next time.
1:05:21
Okay.
1:05:30
Thank you.